Volkswagen steers toward electric vehicles after emissions scandal

As Volkswagen tries to win back customers repelled by its systemic cheating on emissions tests, the German automaker announced Thursday a new strategy dedicated mainly to electric vehicles.

Volkswagen plans to invest $11 billion in a push toward electric vehicles – releasing 30 such models by 2025 – as well as ride-hailing and autonomous driving.

The company has taken a $20 billion hit since it was caught using software to undermine emissions tests on its diesel vehicles. It is expected to reach a settlement in a San Francisco court this month that would compensate owners of affected vehicles.

Volkswagen, which owns Audi and Porsche, had advertised its diesel vehicles as an environmentally friendly product. The scandal alienated customers and left a stigma on diesel vehicles in general. Will the shift toward electric vehicles help repair the public’s trust?

“It’s going to take a while for consumers to trust VW again,” said Michelle Krebs, a market analyst from AutoTrader. “This is a big shift. Many who have been in electric are already out there. Diesel is what made them unique. But they can’t do the diesel strategy anymore so they have to do something different.”

Despite the emergence of electric cars over the last few years with Tesla, BMW, Chevy and Nissan all releasing their own models, electric cars, plug-ins and hybrids only account for 2.45 percent of the market, according to Edmunds.com. The market has actually been declining since it peaked at 3.7 percent in 2013, according to the same site, in part because of falling gas prices.

“Right now they’re all slicing pieces off of a very small pie,” said Jessica Caldwell, the director of industry analysis at Edmunds.com.

Analysts recently projected that number to increase to 8 percent by 2022. Volkswagen hopes electric vehicles will account for as much as 25 percent of total sales by 2025.

That figure might be optimistic, auto industry experts said.

“It’s a risky statement because unless there’s policy changes in the U.S or gas prices spike, it’s not going to change,” Caldwell said. “What (consumers) want is not these vehicles. People don’t want these small economical vehicles. They could be putting their eggs in a basket that consumers have shown they’ve been resistant to so far.”

While the U.S. market isn’t showing as much optimism for electric vehicles, Volkswagen is a global company and might have more strength in foreign markets.

“The demand in overseas markets like China is very high because of their pollution,” said Rebecca Lindland, a senior analyst at Kelley Blue Book. “So it really compels Volkswagen to look at developing some of this technology.”

Volkswagen has already gotten its start in electric cars. In November, it promoted an electric version of its Golf, one of the more affordable electric cars on the market, at the Los Angeles Auto Show.

Volkswagen stock started the day trading at about $178, down about $4.60, or 2.52 percent.